The New Age of Austerity

30 April 2009

So are we really entering a new “age of austerity,” where, in the same way shoppers boast about how much they’ve saved at Aldi and Lidl, business travellers will show off at meetings about how little they spent staying at Travelodge and Express by Holiday Inn? Are the days of spas, executive floors and small bottles of Molton Brown in the bathroom really over? – to be replaced by anonymous check-in, a pub next door and large, fixed, non-branded products in a shower room?

Well, according to technology provider, Amadeus, which has launched a new survey on the habits of business travellers, the answer is a resounding “yes”.

The research, conducted by the Economist Intelligence Unit, has found that in 2009 business travellers will take fewer, shorter and cheaper business trips and will opt for basic efficiency and good service over ancillary services. And although the results vary slightly by region – this report polled 354 executives in Asia, Europe and North America – overall the message was the same: Wi-Fi (76%) and a quiet room (56%) beats a good restaurant (13%) and a gym every time (16%).

So what does this mean for corporate business at four and five-star hotels?

“It’s not the end of the world for four and five-star properties,” reassures Jerome Destors, of Amadeus’ hospitality business group. “There will be business, but they are going to have to lower their rates a little. Not out of control, but a little bit.

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“They also need to adapt what package they offer the business traveller to include such elements as free Wi-Fi.”

The danger – and this is what happened after 9/11 – is that the top end of the market could get into a price war. Grant Appleton, commercial director UK at HRS, believes it could happen: “We may get into a position where the three and four star market are competing against each other to attract corporate business.”

The result could be – and this is the irony – that top-end rates might fall to a par with the budget brands. This is not unprecedented. The so called “Denmark effect” happened in the Scandinavian country when a number of four and five-star properties got locked into a bitter price war and the net result was that rates dropped so low that they became cheaper to stay in than a nearby three star.

In fact, you can see this happening almost every weekend in the major cities of the world as business-focused hotels scramble to fill their rooms on increasingly quiet Friday and Saturday nights.

But according to Jerome, even this may not be enough to encourage the corporate traveller back into the high-end properties: “There will be some bargains but I don’t think a drop in rates is necessarily enough. The traveller is now respecting the policy of the corporate, and most of the time that is about downgrading where they stay.” Of course, the top end hotels are open to rate negotiation, whereas the budget brands are not, so if the business traveller is prepared to go out of policy he may find he can benefit from this new Age of Austerity after all.